US Customs and Border Protection (CBP) has revised key elements of its interpretation of how the Jones Act should be enforced going forward
The move has significant implications for the US offshore sector.
In a bulletin published on 23 October 2019, CBP struck out or modified a longstanding set of ’letter rulings’ on how and when foreign-flagged ships may be used in offshore applications.
The Merchant Marine Act of 1920 (The Jones Act), now in its 101st year, regulates cabotage in the USA.
The Act is a protectionist legislation that requires that all goods shipped between US ports (including US states and territories) be transported on ships that are built, owned and operated by US citizens.
There is a general prohibition on foreign vessels engaging in any part of the transportation of merchandise between US points.
The Jones Act affects the offshore sector because it extends beyond the US’ territorial limits by virtue of the Outer Continental Shelf Lands Act (OCSLA) enacted in 1953 to deal with the business of offshore oil. OCSLA deals with any device, structure or installation permanently or temporarily attached to the seabed.
Changes to the interpretation of the Jones Act
Because legislation lags behind technology, the law could not keep up with the changing offshore oil business, so federal agency the CBP has dealt with the interpretation and the application of the Jones Act to particular offshore activities.
Alterations centre on how the agency interprets the term ’vessel equipment,’ a perennial point of debate for the US offshore oil and gas sector.
In rulings that go back decades, CBP has created a framework that determines which objects loaded aboard an offshore construction vessel are ‘cargo’ and which objects are ‘vessel equipment’:
CBP now intends to apply a wide interpretation to vessel equipment. The bulletin states that it will now include “all articles or physical resources serving to equip the vessel, including the implements used in the vessel’s operation or activity.”
If these modifications come into play, clarity on what exactly constitutes vessel equipment would only become clear in future rulings as CBP has not given any examples of specific articles. Instead it has said it expects to receive requests for clarification on a case-by-case basis.
Potential impact on offshore
The changes have drawn criticism from vessel operators who fear that CBP rulings on what activities could be handled by non-Jones Act equipment could open the door to foreign vessels.
The Offshore Marine Services Association (OMSA), which represents American offshore services operators said “We are disappointed that [CBP] has decided to put America second by creating potential loopholes for foreign vessels and crews to unlawfully operate in American waters and take the jobs of American vessels and workers."
In December 2019, CBP published a bulletin revealing its intention to move forward with the proposed changes. These changes will now become effective 17 February 2020.
Riviera’s Annual Offshore Support Journal Conference is the premier conference for the global offshore support industry delivering the latest industry data and expert analysis of key trends on 5-6 February 2020 in London. Book your ticket now